Annual Reports 2016/17
The COGTA Deputy Minister, in his opening comments, said the Municipal Infrastructure Support Agent has established a Regional Management Support Contract, which is a five year programme targeted at the 27 priority rural district municipalities and aimed at the eradication of service backlogs. It has been piloted in the Amathole District Municipality, OR Tambo District Municipality and the Sekhukhune District Municipality. COGTA has formed a partnership with the South African Local Government Association (SALGA) to help with the roll out of the councillor introduction programme. There are 17 criminal cases being investigated, of which the majority of them are in Limpopo and the Eastern Cape. A database of municipal officials found guilty of maladministration or who resigns before the investigation is completed will ensure they are not employed by any municipality again.
The Department of Cooperative Governance (DCoG) and other stakeholder entities will host a Local Economic Development Summit to adopt an integrated approach in economic development. The department had underspent on several line items and reasons were provided. It has for the first time submitted to the Auditor-General an asset register to improve on the management of assets and has developed a Service Level Agreement for the appointment of Implementing Agents for the Community Work Programme (CWP). It had appointed Deloitte to investigate possible irregularities with regards to payments and non-compliance to the CWP Implementation Manual.
In 2016/17, DCoG received a qualified audit opinion, which led the department to start strengthening its internal controls in 2017/18. The qualification was as a result of there being insufficient appropriate audit evidence for payments made in the Community Work Programme.
The Committee asked about how COGTA is assisting municipalities to pay their Eskom bills; asked for an update on the 109 forensic investigations; how they deal with corrupt officials and ensure those officials are not appointed again.
The Municipal Infrastructure Support Agent performance was brought down due to challenges with Supply Chain Management (SCM) and Internal Audit. It received an unqualified audit for Programme 3 and a qualified audit for Programme 2. A recruitment schedule to fill vacant positions starting with critical posts, was developed and is currently under implementation.
The Committee asked why MISA failed to submit its Annual Report on time; about the use of contractors and its slow response to challenges.
The Department of Traditional Affairs said only 80% of its project actions towards achieving targets were achieved. It was in the process of filling critical positions. It received clean audits for both its financials and performance information.
The Committee said DTA must take the deaths of the young initiates seriously. The task teams on site should consist of members of communities and not only traditional leaders. There are some traditional leaders who believe that a health practitioner should not be included in the initiation process.
Opening comments by Deputy Minister of Cooperative Governance and Traditional Affairs
COGTA Deputy Minister, Andries Nel, said the Department is hoping that many of the acting positions will be filled by permanent staff within the next year. The United Nations has declared the month of October as World Habitat Month, declaring that the status of urban towns should ensure adequate shelter for all. The Department is still facing challenges with the Community Work Programme – the Director General will provide details on the remedial actions intended to be taken.
The Municipal Infrastructure Support Agent (MISA) has established the Regional Management Support Contract (RMSC) as a flagship programme which is an integral part of the programme management office. The RMS is a change management programme aimed at transforming municipalities as fully functional institutions. It was conceptualised as a five year programme targeted at the 27 priority rural district municipalities aimed at the eradication of service backlogs. The programme is being piloted at three districts over a two-year period: Amathole, OR Tambo and Sekhukhune District Municipalities. A regional support contractor has been appointed to support each of the three pilot districts over a two-year period. COGTA is committed to working with other departments to implement the Back to Basics Ten Point Plan through the second phase of the programme. A partnership with SALGA was helping to roll out the integrated councillor introduction programme, which included for the first time the involvement of traditional leaders.
COGTA is committed to dealing with corruption and maladministration. Out of the 17 criminal cases reported, 5 cases were in Limpopo, 4 in Eastern Cape, 2 in Gauteng, 2 in Western Cape, 1 in KwaZulu-Natal, 1 in North West, 1 in Mpumalanga and 1 in Northern Cape. A database of the names of the officials found guilty of maladministration has been created to ensure they are not employed by any municipality again.
Deputy Minister Nel concluded by saying the Department values the input and support of the Committee. He was disappointed to hear that the Committee believes the Department had not provided the Committee with full of facts during the course of the year. The EXCO of the Department is committed to working with the Committee in a truthful and open manner. Where mistakes have been made the Department is committed to rectifying those.
Department of Cooperative Governance (DCoG) briefing
Dr Charles Nwaila, Director-General: Department of Traditional Affairs, said DCoG executed its mandate within a constrained budget allocation. Out of the 22 planned targets, 20 were achieved. The Auditor-General had made findings on the usefulness and reliability of performance information. Also, quality assurance has been built in during the 2017/18 for the Annual Performance Plan (APP) to improve on the Technical Indicator Descriptions. DCoG targeted to have 6 spatial contracts facilitated for key restructuring zones in districts and metros by the 31 March 2017. This target was not achieved. DCoG has in the 1st Quarter of 2017/18 established a Project Management Office to drive the implementation of the Integrated Urban Development Framework. The appointments of contract employees at the level of Director and Chief Director have already been finalised.
DCoG also targeted to support 24 municipalities during the year; however it managed to support 22 municipalities only. There were delays in finalising the Moretele Small Towns Strategy due to municipal internal challenges. A remedial action has been established for the 1st quarter of 2017/18: Investment Packages for Socio Economic Catalytic Projects in three municipalities in the Mining Towns have been identified. In November 2017, CoGTA, the Departments of Small Business Development and of Science and Technology and the South African Local Government Association (SALGA) will be convening a Local Economic Development Summit to adopt an integrated approach in economic development.
DCoG underspent its budget for all six of its programmes, including Compensation of Employees, Goods and Services and Transfers and Subsidiaries with R48 117, R915 678 and R2 204 986, respectively. The reasons for the underspending were due to the effect of the 2016 MTEF baseline cuts in compensation of employee allocations by Cabinet and the suspension on the filling of vacated and priority posts up to November 2016 due to the estimated deficits for 2018/19. Also there were delays in the receipt of complete and accurate invoices from creditors and need for due diligence processes before payment. The effect of the late and slow start with the implementation of the 2016 Procurement Plan, due to unforeseen administrative delays, caused the underspending for Goods and Services.
In 2015/16 the Department received a qualified audit mainly for Community Work Programme (CWP) asset management and asset registers. Asset registers were submitted to the AG for the first time, and this will form the basis of effective management of these assets. For this, the Department is in the process of changing the CWP implementation model in consultation with the National Treasury; it has established an asset register to improve on the management of assets; developed and tightened the Service Level Agreement for the appointment of new Implementing Agents (IAs); given the fact that the current management information system is manual, it posed several challenges. As such, the Department is in a process of finalising the web based Management Information System (MIS).
During September 2015 a forensic audit was commissioned by the Department for possible tender and procurement irregularities within the CWP. This investigation was as a result of concerns raised by the AG in the 2014/15 audit as well as whistleblowers. This review was concluded in January 2016; however this was regarded as Phase 1 of the review. Due to the extent and severity of the findings, a Phase 2 was commissioned in August 2016 and this was concluded in July 2017. The Department appointed Deloitte to investigate possible financial irregularities by the IAs. The scope of this review included irregularities in payments and non-compliance with the CWP Implementation Manual. Deloitte did not encounter any specific fraud indicators of the individuals implicated in the alleged misconduct – this was confirmed through a letter dated 31 August from their management.
DCoG reported that seven of the cases were closed as these were either actioned by the IAs or the information available was inconclusive. Eight cases required disciplinary action by the IAs against the said supervisors and site administrators, leading to one serving six months in jail. Further, 14 cases have since been reported to the South African Police Service (SAPS). The potential loss due to fraud was R8 588 000.
In 2016/17 the Department received a qualified audit opinion, which led it to start strengthening its internal controls in 2017/18. The qualification was as a result of there being insufficient appropriate audit evidence for payments made to CWP implementing agents as the Department could not provide accurate and complete substantiating records, as required by the contracts signed with implementing agents. Also, the AG found that there was insufficient appropriate audit evidence for accruals and payables.
It was found that the financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework and supported by full and proper records as required by section 40(1)(a) and (b) of the Public Finance Management Act. As a result, the Accounting Officer is considering providing more capacity especially in the finance section during 2017/18. It was also found that effective steps were not taken to prevent irregular expenditure, amounting to R329 863 000 as disclosed in note 31 of the Annual Financial Statements (AFS), as required by section 38(1)(c)(ii) of the Public Finance Management Act and Treasury Regulation 9.1.1. To rectify this, the Department intends reviewing internal controls on an ongoing basis to inform further amendments to processes, procedures and delegations. Further, it will facilitate the implementation of the revised Standard Operating Procedures for all types of payments. Also, management did not implement proper record keeping in a timely manner to ensure that complete, relevant and accurate information was accessible and available to support financial and performance reporting. The Department has decided to continue to train staff and to monitor that complete records are centrally maintained on a monthly basis and that records are immediately available for audit processes.
Mr K Mileham (DA) said in the previous year’s Budget Review and Recommendations Report (BRRR) the Committee commented that “the department regress from an unqualified audit obtained in 2014/15 was two-fold: lack of sufficient audit payments made to CWP implementing agents as the department could not provide accurate substantial records”; and due to the issue of tangible assets. The Committee had identified that there were two elements to CWP problems: the asset register and payments made to the IAs. He acknowledges that progress was made on the asset register but the record keeping and contracts with IAs has not been made. This matter seems to be a problem with the department and not the IAs. When Pravin Gordhan was the Minister, the department indicated that there were 109 investigations being done. To date the department has not updated the Committee on the progress made on those forensic investigations.
He asked what the department has done to help municipalities obtain assets and how it intends on assisting municipalities to pay their Eskom electricity bills. DCoG needs to put an emphasis on addressing the irregular expenditure of the Community Work Programme. A number of the targets not achieved in the 2015/16 APP have not been included in the 2016/17 APP – he asked if these targets were not supposed to be achieved in the 2016/17 APP. He mentioned that there are two Bills which were not achieved in the previous financial year that were not added to the 2016/17 APP. The Department has also not implemented SMART objectives.
Mr C Matsepe (DA) asked how many of the 43% pending cases have now been investigated. He recommended that the Department should monitor the relocation of corrupt officials who end up being employed by other departments.
Deputy Minister Nel replied that COGTA is committed to introducing both Bills to Parliament. It is hosting a CoGTA legislative forum with the South African Local Government Association (SALGA) and other organisations to discuss the legislation that will be presented to Parliament.
Ms Dorothee Snyman, COGTA Chief Financial Officer, replied that many of the matters that were not addressed automatically move to the next financial year for improvement or achievement. DCoG received only Part 2 of the forensic investigations, which mainly related to CWPs. COGTA will approach the AG to help with condoning. DCoG will only be able to regulate most of the IAs by the end of April 2018.
Mr George Seitisho, Project Manager: Community Work Programme, replied that the department is trying to fast track the appointment of a Project Management Unit to capacitate the CWP Unit to deal with the 300 600 subsidies throughout the country. The inception of the new cycle will be able to monitor a number of the CWP projects, as many are done in remote areas. A new monitoring system for CWP is being implemented – there have been two sessions with the Sector Education and Training Authority (SETA) for work-based sites for registration.
Mr Ntandaza Vimba, Acting Chief Executive Officer: MISA, replied that supporting the municipalities to obtain assets has been a challenge. There are a number support programmes that have been implemented to help support municipalities, but what MISA has realised is that the problems experienced by the municipalities do not only require technical support, hence the establishment of the RMSC. MISA has targeted municipalities that have a history of poor performance, and those who have lost a number of officials due to poor performance. MISA has appointed Accounting/Finance, Procurement, Human Resource Supply Chain, Change Management and Project Management specialists to help support the municipalities. A training programme has been established to train 300 municipal officials on a number of technical programmes, such as project management, contract management and asset management. Due to the interest, there have been an additional number of official who wanted training, hence 887 officials have been trained.
The Chairperson said a number of municipalities do not supply water to their communities due to decaying infrastructure, such as burst pipes. COGTA cannot continue to spend money on projects that are not in any way assisting the municipalities – the expenditure becomes wasteful expenditure. If COGTA claims that systems have been put in place and are functioning, yet communities claim they do not have water – this does not assist the Committee. The quality of life of communities has to be improved.
Mr Tebogo Motlashuping, Acting Deputy Director-General: Institutional Development, replied that the department had intended on tabling amendments to the Municipal Demarcation Act, Municipal Systems Act and the Municipal Structures Act to Parliament; included in the General Laws Amendment Bill. However, due to the different phases at which each Amendment Bill is at these will be tabled at different times.
Mr Motlashuping said the Department has made an analysis of the forensic reports submitted; the analysis was made with provincial departments and municipalities. The analysis indicated that most of the reports relate to corrective measures to be taken either by the municipality or by provincial departments. Municipalities do not adhere to the recommendations of the forensic reports. The Municipal Systems Act requires that the Minister keeps a database of dismissed staff. Provinces are required to report to national department on a quarterly basis on the appointment of all senior managers in municipalities and an indication of how far the investigations are. That information is monitored and updated for COGTA to keep on its systems. A template has been created for all municipalities to use when someone is applying for a job, further the municipalities should write to the Minister asking if those shortlisted for a vacancy appear on the database of dismissed staff.
Deputy Minister Nel added that those officials who resign during a forensic investigation will also be added to the database of individuals who should not be employed by municipalities.
On electricity debt, the Director-General said there is a fundamental matter concerning constitutional challenges, particularly in the distribution of electricity. There are places like Alexandra that are unintentionally subsidising Sandton with electricity because Sandton is serviced by Eskom. The Presidential Coordinating Council resolved that a declaratory order be made to establish roles and responsibilities. However, this was dismissed and COGTA was tasked with finding alternative ways to sort out the matter. There are 86 municipalities that are in distress. SALGA has come up with a number of proposals but these will be elaborated on when the Department of Energy Director-General briefs the Committee.
Mr Vimba replied that MISA acknowledges that a number of communities do not have water, this stems from poor planning between the department and municipalities. MISA has identified 18 municipalities where there is a bulk water supply, but with no matching reticulation networks, and in some instances there is reticulation but no bulk. To address these, MISA, COGTA, Department of Energy, DPSA, Treasury and the Department of Water and Sanitation have established a programme to pilot a cost recovery plan to improve the quality of service. The programme will not only look at reticulation but also financial management.
Mr X Ngwezi (IFP) said in cases where municipalities have placed underground water pipes, the timeframes for when the water will be available should be given to the communities. He asked that COGTA provide the Committee with a list of the municipalities that have improved.
Mr E Mthethwa (ANC) said MISA should provide the Committee with a list of the projects for oversight purposes. He asked how COGTA will deal with matters where officials, who have been found guilty of misconduct, have been appointed elsewhere.
Mr Matsepe asked why the investigations at the Elias Motswaledi Local Municipality were called off.
Mr Motlashuping replied that regardless of an official resigning, COGTA will continue with the investigations. Municipalities were also advised that investigations should continue even after the official has resigned, and resignation letters should not be accepted. Also, the Municipal Systems Act which empowers the Minister to create a database for dismissed staff relates only to municipal employees. The Minister does not have the powers to add those officials employed by the provincial or national departments. The Department will supply the reasons in writing to the Committee why most cases were dropped in the Elias Motswaledi Municipality.
Municipal Infrastructure Support Agent (MISA) briefing
Dr Nwaila said out of 27 performance indicators in the APP only 18 were achieved (67%), six were partially achieved and three were not achieved. MISA’s performance has been brought down due to capacity challenges in some critical functional areas such as Supply Chain Management (SCM) and Internal Audit. There were delays in the approval of the revised structure which constrained MISA’s ability to fill vacant positions, and the process of filling vacancies on the new structure approved in January 2017 by Department of Public Service and Administration (DPSA), is currently under way. The reasons for the non-achievement of targets were provided (see document).
MISA total expenditure for 2016/17 was R295.7 million (85%) of the total allocation of R349.9 million. Underspending was 15.5% of the total budget. The underspending was caused by delays in the approval of the organisational structure, which resulted in under-spending on Compensation of Employees by R17.9 million. MISA had intended to pilot a project on Regional Management Support Programme (RMSP); a ring-fenced funding of R30 million was received from National Treasury towards this but the funding was only committed towards the end of the financial year. However, MISA has written to Treasury requesting to retain the funds for 2017/18.
MISA received an unqualified opinion for Programme 3 and a qualified opinion for Programme 2. The basis of the qualified audit was due to unreliability of performance evidence for three of the performance indicators. A post audit action plan to address the root causes of the audit findings for both financial and predetermined objectives has been developed and is being monitored on a monthly basis.
To remedy the problems, MISA will revise the budget structure during the budget process for the Medium Term Expenditure Framework (MTEF) starting from 2018/19 to ensure alignment with the revised organisational structure. Alignment between the programme structure and the new budget structure will also be effected. A recruitment schedule to fill vacant positions starting with critical ones has been developed and is under implementation. A formal process for controlling granting of user access and system change management is being developed and the ICT Strategic Management Framework will be developed and implemented.
MISA will fill positions for 50 civil engineers, 15 town planners, and 15 electrical engineers. These positions were advertised on 10 September 2017. Three positions within the SCM unit have been filled and shortlisting for three middle management positions have been conducted. Capacity for SCM is currently being complemented through a service provider contracted over two years to assist with enhancement of the SCM control system and processes.
Mr Mileham said the MISA Annual Report was not tabled to Parliament on time for review. He said MISA had two weeks to compile this for the Committee as it is requested by legislation and Parliament. The AG confirmed that they had completed the MISA audit by the specified deadline, but the delays were due to a discussion with MISA about it APP. The Committee cannot conduct oversight without the Annual Report within the prescribed deadlines. He noted that the acting CEO has been in an acting position for longer than expected. He has a problem with how MISA often takes a long time to respond to problems. There needs to be consequences for poor performance. The AG highlighted that MISA should pay attention to its Supply Chain Management and procurement of staff and poor contracts.
Mr Mthethwa asked for what purpose does MISA need contractors, and how are the contractors sourced.
Deputy Minister Nel replied that COGTA is also concerned about the number of vacant senior positions – the Department is in the process of interviewing people to fill the positions of DDG for MISA.
Mr Vimba replied that all provincial heads of department have been successfully appointed. MISA is in the process of finalising the selection of interns for the engineering department; the interns will report to the chief engineer. The Supply Chain Managers are required to undergo constant training; in fact MISA has appointed an audit firm to assist with the supply chain training. He invited the Committee to visit one of their projects that were submitted as a list to the Committee. The AG has raised the slow response of MISA, particularly to consequence management such as disciplinary hearings. MISA has implemented a structure which eliminates the use of contractors for technical work – MISA has appointed permanent staff with technical skills and experience.
Mr Victor Mathada, Chief Director: Strategic Support; MISA, replied that the Annual Report will be submitted in two weeks before the audit report is tabled to Parliament.
Department of Traditional Affairs (DTA) briefing
Dr Nwaila said DTA’s objectives are to enhance information management of faith structures, traditional leadership institutions and communities by 31 March 2020; reduce the number of deaths and injuries resulting from cultural initiation practices to zero by 31 March 2020 and promote a transformation agenda and socio-economic development within traditional leadership structures and communities by 31 March 2020. DTA’s target to harmonise relationships and role clarification between elected and traditional leadership at local level was partially achieved – only 80% of project plan actions towards the achievement of the target were finalised.
During 2016/17, DTA realised a saving of R3.3 million which translates to 2% of the total appropriated budget on Compensation of Employees. DTA prioritised filling two critical DDG positions, however, due to DTA not having Human Resource Management (HRM) staff, there were slow recruitment processes and the posts could not be filled in that year. A Director: HRM was appointed in 2017/18 and it is envisaged that the two DDG vacant funded positions will be filled before the end of 2017/18.
The 2016/17 AFS were submitted on time to the Auditor General for audit. DTA received a clean audit from for both financials (AFS) and performance information (APP targets).
Mr Mthethwa asked what the acronym CTLDC is and why only one target was planned for the programme. Some of the programmes seem to be under-planned and look easy to achieve the target.
Ms Shoky Mogaladi, DTA Executive Manager: Office of the DG, replied that the CTLDC is the Commission of Traditional Leaders Disputes and Complaints. The one target relates to the 120 cases that were researched – the 120 cases were not divided into 120 different targets. DTA has not under-planned; rather it had to consolidate many of its programmes due to a lack of available funding.
Mr Wilson Makgalancheche, Chief Director: DTA, replied that DTA will provide the Committee with reports indicating that the deaths of the initiates were not the fault of DTA but rather the teams who were on site. There are task teams who help support the initiation season.
Mr Matsepe said the task teams should also consist of members of the public and not only traditional leaders. There are some traditional leaders who believe that a health practitioner should not be included in the initiation process.
Dr Nwaila said the medical male circumcision process has been embraced by a number of traditional leaders. Areas such as Mpumalanga and Limpopo have welcomed health practitioners, but there are still problems within the Eastern Cape and some areas of KwaZulu-Natal.
The Chairperson said DTA must take the deaths of the young initiates seriously.
The Chairperson said the Committee will request a meeting with MISA once an oversight visit of its projects has been made.
Deputy Minister Nel noted that the meeting did not deal with the National Disaster Management Centre (NDMC). Although the Department has somewhat made improvements with responding to disasters there are still gaps which need to be filled.
Mr Mileham said there are two big challenges for the NDMC: the majority of the provincial disaster management centres are dysfunctional because all of the functions often shift to the NMDC. The problem with the provincial disaster management centres is that when disaster management is called for, it takes two days for disaster management to respond – the process is too cumbersome and bureaucratic.
The meeting was adjourned.